Tuesday, 23 July 2013

Communism, why we are not Communists

Communism, why we are not Communists
Not many people would confuse Conservatism with Communism but I want to show why Communism cannot work, ever.

When most people think of Communism they think of a Political system, but Communism is in fact an Economic system, and basically it states that economic life is unfair. Some people are very wealthy and some people are very poor and that it would be better if society was more equal or level, as Marx wrote "to each according to his need". They then asked what creates wealth, why are some people rich and others poor?

The answer was that the rich owned things that created wealth, farms, factories, mines, shops and transport. Those who didn't own these things tended to be poorer, often much poorer than those who did. So they decided that "the means of production", the things that created wealth, shouldn't be owned by individuals but should be owned by everyone more or less equally. But while it is possible for everyone to own a portion of a factory for example, it wouldn't be possible for them all to manage it, so the question was who should?

They decided that they needed a disinterested party to look after everyone's interests and they further decided that that disinterested party was the Government. The Government would control and manage the "means of production" on behalf of everyone. But that left them with another problem, in a Free Enterprise system or Capitalism as they called it. Prices were decided by competition, companies competed with each other and that help determine the price of goods as well as wages. But Communism said that one of the great evils of Capitalism was competition because it drove workers into both the poor house and an early grave. It forced workers to work faster and in unsafe working conditions to achieve profits, which they didn't get a fair share of. The answer they came up with was Central Planning.

Instead of thousands of companies competing with each other, now a group of economic experts could decide using facts and logic and arrive at a better and fairer answer. But it turned out that there was a flaw, a fatal flaw in Central Planning and that was that while it was a fantastic idea, it didn't work. In fact it had not one, not two, but three fatal flaws all wrapped up in the Central Planning scheme.

All Eggs in One Basket

In Free Enterprise economies both the Government and the Business sector have their own money and if one makes a mistake it can be bailed out by the other sector. But under Communism there is only one sector, only one pile of money, so when things go wrong there is no where to turn for help. You cannot bring in an independent expert to get different ideas, because no such person exists, everyone has the same boss.

The Fantasy Economy

The major problem with Central Planning is that everyone and everything must be honest and above board when reporting to the Central Planners. No one can lie, be mistaken or gilt the lily, because if they do the Central Planners are not designing the real economy they are designing a fantasy economy. That really becomes a problem in the long term, short term it can be covered over or simply ignored, but long term the effects become magnified. Because there is no correction to the mistakes, only the Central Planners can correct the mistake and if they do not realise or accept the mistake it simply cannot be fixed. Instead of individual companies making adjustments, the Central Planners are the only ones allowed to adjust things and if they don't fix it nothing happens.

Didn't Create Wealth

Communism is against private wealth but it's not against wealth creation, it is against the unequal distribution of wealth. That means that the Communist economy is still supposed to create wealth, but often it didn't. The example that I think of is the Ukraine, before the Russian Revolution it was called the bread basket of Europe, as it produced so much food, mainly wheat and other grains, but by the 1970's the Soviet Union imported wheat from Australia, Argentina, Canada and the United States. It wasn't that population had increased as that had happened everywhere, it was mismanagement. Food isn't just life, it is wealth and that wealth wasn't even being created.

Now magnify each of these problems over the entire economy and let it stew for decades, it's no wonder Communism collapsed. I do not for a second believe that the Communist states that exist today will survive, by the end of this century, non of them will be Communist. The rules of economics will demand it.